Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Even before Singapore could move on from the confidence-busting penny stocks crash of 2013, here comes another potential scandal. Exasperated investors will naturally wonder why the city-state's reputation for being largely corruption free doesn't extend to its securities marketplace.

Decline in Singapore Exchange shares over the past 12 months

8.8%

Hints of fresh trouble came Friday after the Business Times reported raids on the offices of Maybank Kim Eng Securities, DBS Vickers Securities, OCBC Securities and Phillip Securities. The Monetary Authority of Singapore confirmed in a statement that it had indeed, together with the white-collar crimes cell, obtained ``documents and items.'' The newspaper report said people taken for questioning were believed to be remisiers, or commission agents.

Separately, the Singapore Exchange said it had referred nine cases to the financial regulator between January and March, of which three were related to insider trading and the other six to market manipulation.

It's not immediately clear if the two are related. What's more certain, though, is that neither SGX or the brokerages can really afford another demoralizing scam -- not with the value of shares traded daily scraping the floor at about S$1.14 billion ($845 million), down 28 percent from what the bourse had gotten accustomed to between 2007 and 2013.

Valley of Volumes

Average daily turnover on the SGX is yet to recover from the penny stocks scandal

Source: Bloomberg

Shares of SGX declined 3 percent Thursday after a worse-than-expected 1.1 percent increase in quarterly profit. They slipped again, with the benchmark, on Friday morning amid news of the raids. If this is all part of a clean up drive by CEO Boon Chye Loh and Chief Regulatory Officer Tan Boon Gin, then the gains from stamping out bad behavior may eventually outweigh the sacrifice of trading volumes. Trouble is, Singapore doesn't have time on its side.

Trading Flat

Singapore Exchange's income has been pretty lackluster for the last few years

Source: Bloomberg

The idea that the city-state would become Asia's capital-market gateway is already past its sell-by date. The local equity market has seen a little more than $4 billion of issuance over the past 12 months versus almost $27 billion in Hong Kong and a massive $220 billion amid choppy markets in mainland China. In Singapore's own backyard, nations such as Indonesia, Thailand and India have seen more share sale action in the last year.

SGX urgently needs to find a new strategy for making Singapore attractive to high-growth companies looking for high-quality capital. The island's stockbroking industry, too, needs to change as automation crunches margins. Self-employed remisiers making less money than Uber drivers isn't sustainable in the long run; and if stock market scandals keep surfacing every few years, it definitely won't be sustainable in the short run.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.